According to a report by the Institute for Fiscal Studies (IFS), the current generation of retirees is doing better than any before it, with lower rates of pensioner poverty than the population average. However, the IFS warns that this success could be making policymakers complacent and blinding them to the risk that future generations will not fare as well.
One concern highlighted in the report is that nearly two-thirds of middle-earning private sector employees who are currently contributing to a pension are saving less than eight percent of what they earn. This means they could be exposed to risks that may be difficult to manage well, especially as nearly all of the pension contributions are in the form of defined contribution pensions.
The IFS also noted that less than one in five self-employed people are saving for retirement, and those who have been self-employed for a long time are especially likely to not be putting money into a pension. Moreover, many approaching retirement are living in expensive, insecure rental accommodation, which could lead to a low standard of living in retirement and/or greater reliance on housing benefit.
To ensure working-age people can enjoy a good retirement, the IFS is carrying out a major pensions review to assess future risks and recommend necessary steps. In the meantime, the best way to secure a decent retirement outcome is to get professional, regulated financial advice to plan for the future. A financial adviser can assess your finances and recommend a bespoke plan to make the right decisions every step of the way.
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